Evercore's Altman: U.S. economy outpacing every single forecast, soft landing has already happened

CNBC Television

11 Apr 202404:25

Summary

TLDRIn the video script, Roger Altman of Evercore discusses the Federal Reserve's stance on interest rates, noting that officials oppose near-term rate cuts amid inflationary pressures. Altman highlights the U.S. economy's remarkable strength, with growth forecasts for 2024 almost double initial predictions. He emphasizes the economy's resilience, with real growth of 8% since 2019, outpacing all global forecasts. Altman also touches on factors contributing to this strength, such as energy costs and labor force growth, while acknowledging the stickiness of inflation.

Takeaways

🏦 The Federal Reserve (Fed) officials are not in favor of any rate cuts in the near term, emphasizing their focus on battling inflation.
📈 Roger Altman of Evercore highlights the strong performance of the U.S. economy, noting its resilience and growth despite global economic challenges.
💼 Altman points out that the U.S. Personal Consumption Expenditures (PCE) index, a key metric for the Fed, is expected to be in the mid-threes, indicating high inflation.
📊 Economists initially predicted a growth rate of 1.3% for 2024, but now see it as almost double that, showcasing the unexpected strength of the U.S. economy.
🌐 The U.S. is the only major economy that has grown in real terms since 2019, outpacing Europe and other regions.
🏭 Altman suggests that the U.S. has an edge in energy costs, which is attracting manufacturing and contributing to economic growth.
💼 The labor force in the U.S. has grown strongly, unlike the rest of the world, which is crucial for economic expansion.
💰 There is still a significant amount of excess pandemic savings, estimated at $300-400 billion, which could be influencing consumer spending.
📈 Oil and gas production, as well as productivity growth, have been positive factors for the U.S. economy.
💹 Despite high inflation, the U.S. stock market is performing well, with valuations and multiples above historical averages, reflecting the overall strength of the economy.

Q & A

What is the current stance of the Federal Reserve on interest rate cuts?
-The Federal Reserve officials are not in favor of any rate cuts in the near term, focusing on the battle against inflation.
What is Roger Altman's view on the current inflation data?
-Roger Altman notes that the data and prints on inflation are on the hot side, suggesting that the PCE, the Fed's favorite metric, is expected to be in the mid-threes.
What is the expected impact of immediate rate cuts on the economy according to Roger Altman?
-Altman suggests that immediate rate cuts and a lot of them for 2024 would be a negative result, indicating that the focus should be on the strength of the economy rather than short-term rate adjustments.
How does Roger Altman describe the strength of the U.S. economy?
-Altman describes the U.S. economy as having remarkable strength, noting that the growth rate for 2024 is expected to be almost double the initial forecasts.
What was the initial forecast for the U.S. economic growth rate in 2024?
-Six months ago, the majority of economists thought the growth rate for 2024 would be about 1.3%.
How has the U.S. economy performed compared to other economies since 2019?
-Since 2019, the U.S. economy has grown by 8% in real terms, making it the only economy in the world that is now bigger than it was before the pandemic.
What is one factor contributing to the U.S. economy's resilience, as mentioned by Roger Altman?
-Altman points out that the U.S. has an edge in energy costs, which is attracting manufacturing and contributing to the economy's strength.
What is Roger Altman's perspective on the role of excess pandemic savings in the current economy?
-While acknowledging that there is still around $300-400 billion of excess pandemic savings, Altman believes that the strength of the U.S. economy goes well beyond this factor.
What are some factors contributing to the growth of the U.S. labor force, according to Roger Altman?
-Altman mentions that the U.S. labor force has grown strongly, unlike the rest of the world, which is a crucial part of the supply side needed for overall economic growth.
How does Roger Altman view the current state of productivity growth in the U.S.?
-Altman notes that labor productivity has been impressive over the past two years, contributing to the overall positive performance of the U.S. economy.
What is the general sentiment in the market regarding the U.S. economy's performance?
-Altman suggests that the market is generally high, with multiples above historical averages, reflecting the strong performance of the U.S. economy.

Outlines

00:00

💼 Fed Officials' Stance on Rate Cuts Amid Inflation Concerns

In this paragraph, the discussion revolves around the Federal Reserve's (the Fed) current position on interest rate cuts. Three Fed officials have expressed their views against any rate cuts in the near term due to ongoing inflation concerns. Roger Altman of Evercore is invited to share his thoughts on the Fed's potential actions and what they should do. Altman emphasizes that inflation data cannot be ignored, especially with the Fed's preferred metric, the Personal Consumption Expenditures (PCE), expected to be in the mid-three percent range. He also highlights the unexpected strength of the U.S. economy, noting a significant upward revision in growth forecasts for 2024 from 1.3% to almost double that rate. Altman points out that the U.S. economy is the only one that has grown in real terms since 2019, surpassing its pre-pandemic size, unlike Europe, which has grown by over 3%. The market's focus on short-term rate cuts is contrasted with the broader economic resilience and strength of the U.S., which is why stock valuations remain high despite the week's performance.

Mindmap

Keywords

💡Fed

The 'Fed' refers to the Federal Reserve, the central banking system of the United States, which plays a crucial role in setting monetary policy, including interest rates. In the video, the Fed's stance on rate cuts is a central theme, with officials indicating they do not favor any in the near term, reflecting their approach to managing inflation.

💡Inflation

Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. The script mentions that the Fed is battling against inflation, with data indicating that the PCE (Personal Consumption Expenditures) index, the Fed's preferred inflation metric, is 'on the hot side,' suggesting price levels are rising faster than desired.

💡Rate Cuts

Rate cuts refer to a decrease in interest rates set by a central bank, like the Federal Reserve. In the context of the video, the discussion revolves around the Fed's reluctance to implement rate cuts in the near term, which is a significant monetary policy decision impacting economic growth and inflation.

💡PCE

PCE stands for Personal Consumption Expenditures, which is an index that measures the changes in prices of goods and services consumed by individuals in the United States. It is highlighted in the script as the Fed's favorite metric for inflation, with expectations that it will be in the mid-threes percentage points, indicating a higher-than-desired inflation rate.

💡U.S. Economy

The U.S. Economy is the topic of significant discussion in the video, with Roger Altman noting its 'remarkable strength.' The script contrasts earlier pessimistic forecasts with the current robust performance, emphasizing the economy's resilience and growth, which is outpacing predictions and contributing to high evaluations and stock performance.

💡Growth Rate

The growth rate mentioned in the script refers to the pace at which the U.S. economy is expanding. Initially, economists predicted a growth rate of about 1.3% for 2024, but current forecasts nearly double that initial estimate, showcasing an unexpected and strong economic performance.

💡Unemployment Rate

The unemployment rate is a key economic indicator that measures the percentage of the labor force that is unemployed but actively seeking employment. The script points out that the Fed's forecast for the 2024 unemployment rate was a full percentage point higher than the actual rate, indicating a better job market than anticipated.

💡Energy Costs

Energy costs are discussed in the context of giving the U.S. an edge over other nations, such as Germany. Lower energy prices can significantly impact manufacturing costs and decisions on where to situate production facilities. The script suggests that the U.S.'s lower energy costs are attracting foreign investment and contributing to economic strength.

💡Labor Force

The labor force consists of all individuals who are employed or are actively seeking employment. The script notes that the U.S. labor force has grown strongly, unlike the rest of the world, which is a positive factor for economic growth as it contributes to the supply side of the economy.

💡Productivity Growth

Productivity growth refers to the increase in output per unit of input, often labor or capital. The script mentions that labor productivity in the U.S. has improved over the past two years, which is a significant factor contributing to the overall strength of the economy.

💡Stocks

Stocks represent shares in the ownership of a company and are a common investment vehicle. In the script, the performance of stocks is tied to the strength of the U.S. economy, with high evaluations and stock performance being a result of the economy's resilience and growth.

Highlights

Three Federal Reserve officials emphasize their stance against rate cuts in the near term.

Roger Altman of Evercore discusses his views on the Federal Reserve's actions and what they should do.

Altman notes that inflation data is on the higher side, with the PCE expected to be around mid-threes.

Altman suggests that immediate rate cuts for 2024 would be a negative outcome based on current data.

The strength of the U.S. economy is highlighted as a significant factor, with growth rates nearly double initial predictions.

The U.S. unemployment rate is lower than the Federal Reserve's initial 2024 projections.

Since 2019, the U.S. economy has grown by 8% in real terms, outperforming other global economies.

The U.S. is the only economy that has grown beyond its pre-pandemic size.

European economies have grown by over 3%, but still lag behind the U.S.

Altman emphasizes the resilience of the U.S. economy as the primary story, overshadowing short-term market concerns.

The discussion turns to why the U.S. economy has transitioned from a hard landing to a soft landing scenario.

Altman suggests that energy costs and prices are a significant advantage for the U.S., attracting manufacturing.

The role of excess pandemic savings in the current economic situation is questioned.

Altman points out that labor force growth in the U.S. is a key factor in economic strength.

Oil and gas production is noted as a positive for the U.S. economy.

Productivity growth and labor productivity improvements are highlighted as contributing factors to the U.S. economic strength.

Altman discusses the market's high valuations and multiples, attributing them to the strong U.S. economy.

Despite inflation being sticky, the U.S. economy continues to outpace forecasts, demonstrating its robustness.